CBC: FDI stock in 2020 remained positive despite reduction

Cyprus’ net stock of Foreign Direct Investment (FDI) in 2020 remained positive although declining to €10.5 billion compared to €12.billion in 2019, according to data released by the Central Bank of Cyprus (CBC).

The net stock of FDI declined in 2020 due “to the fact that outward FDI decreased more than inward FDI,” the CBC said.

Outward FDI stock reached €399.313,8 million in 2020, compared with €410.565,7 million in 2019, as the “the decrease in equity while debt instruments recorded a small increase.”

The majority of outward FDI stock in 2020 comprised of equity (91%) and, to a lesser extent, debt instruments (9%), the CBC said, noting that the composition of outward FDI does not change much over time with equity always remaining above 90%.

Furthermore, inward FDI stock amounted to €388.814,7 million in 2020, compared with €398.295,1 million in 2019, with the reduction mainly attributed “to the decrease in equity and, to a lesser extent, the decrease in debt instruments,” the CBC added.

According to the CBC, inward and outward FDI changes are similar due to the large share of Special Purpose Entities (SPEs) in both, inward and outward FDI stock.

“Since these entities have no or little interaction with the domestic economy, their assets vis-à-vis non-residents are very similar to their respective liabilities,” the CBC said.

Outward FDI stock destined to Europe amounted to €235.119,6 million in 2020, down from €241.211,0 million in 2019, America following as the second most important continent with an outward investment value of €116.717,5 million, down from a respective amount of €122.924,6 million in 2019.

It should be noted that there is an amount of €39.998,7 million which refers to unallocated data (i.e. data that can not be allocated to a specific country) in 2020.

“As regards the euro area and the European Union (excl. UK), the share of FDI destined to those groups in 2020 amounted to 10.7% and 11.9%, respectively,” the CBC said.

Europe also had the largest share of outward FDI stock with €235.119,6 million in 2020, down from €241.211,0 million in 2019, followed by America, with an outward investment value of €116.717,5 million, down from a respective amount of €122.924,6 million in 2019.

According to the CBC, inward FDI stock, from Europe reached €321.930,4 million in 2020, down from €323.145,0 million in 2019, with inward FDI stock from America (the second most important continent as regards inward FDI) amounting to €39.399,0 million, marking a decrease of €5.505,6 million compared with the previous year.

Furthermore, the services sector (tertiary sector) attracted the highest inward FDI stock with €387.649,6 million in 2020 compared with €397.088,4 million the year before in 2019, with financial and insurance services holding the lion’s share.

“This reflects Cyprus’s specialisation in the provision of financial services,” the CBC said.

Furthermore, outward FDI stocks to the tertiary sector in 2020 amounted to €200.067,5 million, compared with €199.436,2 million the previous year, with most investments channeled to the financial and insurance activities.